RAC Program Identifies $797 Million in Overpayments in 2011

The Recovery Audit Contractor program identified and collected $797.4 million in overpayments and returned $141.9 million in underpayments to Medicare providers in fiscal year 2011, according to figures issued by CMS at the end of November.

The overpayments collected increased each quarter during the fiscal year — from $82.9 million in Q1, to $187.4 million in Q2, $250 million in Q3, and $277.1 million in Q4, ending September 30, 2011.

Underpayments identified and returned also increased each quarter—$9.6 million (Q1); $14.8 million (Q2); $41 million (Q3); and $76.6 million (Q4).

Each of the four RAC contractors had a different top issue that generated more identified overpayments than any other issue in their respective region, as noted below:

HealthDataInsights (Region D)—minor surgery and other treatment billed as an inpatient stay

For the first three issues, the RAC contractors noted that medical documentation for patients diagnosed with those issues needs to be complete and support all services provided. HealthDataInsights cautioned that “when beneficiaries with known diagnoses enter a hospital for a specific minor surgical procedure or other treatment that is expected to keep them in the hospital for less than 24 hours, they are considered outpatient for coverage purposes regardless of the hour they presented to the hospital, whether a bed was used, and whether they remained in the hospital after midnight.”

As discussed in a previous post, a new three-year Recovery Audit Prepayment Review Demonstration will start on January 1, 2012. The demonstration will allow RAC contractors to conduct prepayment claim reviews which will assist in lowering the improper payment rate and will identify potential fraud and abuse, as opposed to the traditional “pay and chase” method.